Supply Chain Management

How do you classify suppliers as a “small” supplier? Generally suppliers are classified based on multiple criteria like size of business, years of loyalty, quality/cost/delivery performance etc. But how do you classify one supplier as small? Because if it is on the size of your business with the supplier, then it is very likely that in certain circumstances this supplier may have large business relationship with some of your competitors…. And you may be losing the necessary foresight to develop potential enhanced business with. If on the contrary you go by the size of revenue that this supplier has globally, then it may be likely that this supplier may not be profitable or relevant to pursue in terms of the regional issues or due to a certain preference you have with some of your “keiretsu” suppliers.

Or is it that you classify a supplier as small because of the type of products that are procured. E.g. a fastener manufacturer may be treated as a small supplier against a cylinder block manufacturer for an engine manufacturing firm. But is that the right classification? A small fastener like a “Oil venture” if blocked or cracked, would cause havoc to your engine and lead to major damage. See the case of CTS a “small” supplier, has  caused the damage of reputation to Toyota worldwide. Even for electronic gadgets, the small supplier who does “passivation” the fasteners would cause major recalls if this has corrosion or electronic continuity issues. So, would you be looking at size of the supplier based on the risk impact that the supplier’s products can cause to your business.

The basic question now is that how would you protect you business from risk caused by these “small” suppliers? You have limited resources at your disposal to monitor suppliers for their development, manufacturing capability and integrity, delivery and other performance parameters. Is it enough to have a system which has good integration of data between your suppliers and your own? How much amount of data can you monitor? There are issues regarding the latest regulations on Heavy metals and other toxic material’s usage, packaging material usage, managing effluents and other pollutants from their plants, labor laws, import restrictions in terms of quotas, anti-terrorism compliance like CT-PAT, tariffs etc. Even though most of these parameters are known to buyers, but for the “small” suppliers how much of this can be maintained and monitored?

There are no conclusions to be drawn here….. the board to quite blank. I would invite your opinion and your experience in these areas, as I am sure these are some of the critical challenges which would be experienced across the “Buyer community”.